Why B2B credit checking may not be as easy as businesses | NTT DATA

Mon, 12 March 2018

Why B2B credit checking may not be as easy as businesses think

Companies wish to improve their market share in the B2B sphere, especially in the small and medium enterprise sector, as profit margins are higher and customer churn is relatively low.

However, the financial risk exposure associated with small /medium business customers can be very high. A recent BACS survey [from July'17] highlights that small businesses in the UK owed more than £14.2 billion. Furthermore, small/medium businesses are often focused on cash flow, and therefore tend to pay for their costs in regular monthly instalments (in arrears) rather than up-front, further exacerbating their credit risk.

From our recent experience working with a multinational client that was trying to expand their B2B presence, we found that the financial risk exposure associated with small /medium business customers required a sophisticated way to credit check each business and, for smaller companies, the individuals (such as the directors of the company) running the business.

Credit checking for small / medium businesses is different, unconventional and highly varied. No credit checking company has an out of the box policy engine or rules to match this need, as each organisation working with small / medium enterprises has their own set of policies and rules. This implies that providers of credit checking solutions should offer the capabilities to host the policies and rules so that the organisations can manage and optimise them accordingly.

In the UK, at present there are very few credit checking vendors who offer the capability to host policies/rules; and even those that do involve complete integration to modern CRM systems like salesforce; generally requiring substantial customisation and the infrastructure to host.

Based on our experience, the main criteria credit checking vendors need to be validated for are:-

  • What kind of service offering is provided? Is it hosted, cloud connectivity or hybrid?
  • What out-of-the-box integration exists with other solutions e.g. Salesforce, AWS, etc
  • How is customers’ data secured, both in transit as well as in the system?
  • How granular and adaptable are the credit checking services to support the needs of different business/sectors within your organisation?
  • How configurable is the policy and rules engine; can the rules/policies be changed easily?
  • What add-ons, such as address checking or company lookup, are available?
  • How often is the company data and address data is refreshed?
  • Is there a presentation layer for underwriters to manually validate complex customers (for example, credit checking a franchise part of an hierarchy)?
  • What is the cost of customisation and long term benefits?

In conclusion, as a B2B provider, you will have to prioritise key requirements to minimise cost and time to deliver, and maximise automation for credit checking business customers. Unmanaged constraints and business rigidity will result in significant customisation of a credit checking solution that will, in turn, be a costly automation exercise.

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